Subject: File No. S7-11-04
From: Joseph M Madden

I am writing as a registered investment advisor about the proposed SEC rule S7-11-04, referring to the disclosure regarding a 2 mandatory redemption fee of mutual funds held for less than five days.

Many of our clients use the checking feature in their retirement accounts for living expense transfers to their regular checking. The clients inform us previous to writing a check as to how much money needs to be transferred into their cash positions in order for their to be sufficient cash for their checks to clear. Using the accounts for checking is a great asset to our clients. However, if we as advisors have recently rebalanced or reallocated holdings in the clients portfolio we will not be able to buy cash positions until the five day waiting period has passed, limiting the clients access to their own money when it is most needed. This fee restricts the benefits offered by an investment advisor and punishes the very people it is intended to protect.

401k participants, a large percentage of mutual fund investors, also could be greatly affected by a 2 penalty fee. 401k participants make direct deposits from their paycheck into their retirement accounts. Because of the proposed five day restriction on trades, any time they rebalance or make a switch in their portfolio it will need to be at least a week after a deposit is made, essentially limiting their ability to self-direct their account. Many uninformed investors making legal trades that do not incur any additional cost to the mutual fund will be punished with a 2 redemption fee.

It seems the 2 redemption fee of mutual funds will cause more harm than help to those it is claiming to protect while rewarding the source of the scandals fund companies not adhering to their stated policies. While some sort of resolution is necessary to protect investors from the cost of late trading, excessive trading, and stale-price trades, a 2 fee is not the answer.